Depreciation. It sounds complex, but it's simply the way accountants acknowledge that assets lose value over time. And when it comes to calculating this loss, the straight line depreciation formula is your best friend!
Why? Because it's straightforward (pun intended!). This method evenly distributes the asset's cost (minus its salvage value, or what you can sell it for at the end) over its useful life.
The formula is: **(Asset Cost - Salvage Value) / Useful Life**.
Let's say you buy a machine for $10,000. You estimate it'll be worth $2,000 after 5 years. Your annual depreciation expense would be ($10,000 - $2,000) / 5 = $1,600 per year.
Easy, right? While other depreciation methods exist, the straight line approach offers simplicity and predictability. Perfect for small businesses and anyone wanting a clear understanding of their asset's declining value.
